Following the release of concrete supplier Pan-United Corporation’s FY2024 ended Dec 31, 2024 results, CGS International (CGSI) analysts Kenneth Tan and Lim Siew Khee are maintaining their “add” call at an unchanged target price of 75 cents.
Tan and Lim note in their March 5 report that excluding a one-off $1.3 million associate impairment loss, Pan-United’s 2HFY2024 core net profit of $24 million was broadly in line with their expectations, as was FY2024 core net profit of $42 million, at 104% of estimates.
Additionally, the analysts see the group’s sustained ebitda margin at 9.4% as a key positive. It is also above the historical FY2019–FY2023 average of 7.3%.
In 2HFY2024, Pan-United’s concrete revenue saw a slight growth of 11% h-o-h and 3% y-o-y, with stronger volumes estimated by Tan and Lim to be in mid-single-digit growth.
See also: OCBC may outperform in near term following removal of GEH overhang: Citi
This is in line with Singapore ready-made concrete (RMC) industry figures, partially offset by average selling price (ASP) weakness.
The group’s dividend per share (DPS) of 2.3 cents for 2HFY2024 and DPS of 3.0 cents for FY2024 are also in line with Tan and Lim’s estimate.
According to the Building and Construction Authority’s (BCA) 2025 outlook, RMC demand growth is expected to range from –3% to 8% this year.
See also: Fiery feud between US President Trump and Tesla CEO Musk sinks Tesla shares
This year, BCA expects construction output to increase by around 5% y-o-y due to a healthy project backlog.
Construction contracts awarded are expected to increase by about 13% y-o-y due to strong demand from the infrastructure and industrial sectors.
Beyond 2025, BCA expects medium-term construction demand from 2026 to 2029 to remain robust. “We continue to view Pan-United as a key beneficiary of healthy construction demand given the group’s sizeable exposure to public infrastructure projects; such projects tend to require larger proportions of specialised-grade concrete, which have higher ASPs and margins, in our view,” write Tan and Lim.
They add: “We believe FY2025 ebitda margin should remain elevated at around 9.3%, backed by improved operating leverage from rising industry volumes, and increased proportion of infrastructure projects benefitting sales mix.”
Re-rating catalysts noted by the analysts include strong industry volume growth and sustained margin strength. Conversely, downside risks include counter-party credit risks and a slowdown in project offtake volumes negatively impacting RMC sales and margins. — Douglas Toh
Frencken Group
Price targets:
CGS International ‘add’ $1.40
DBS Group Research ‘buy’ $1.48
UOB Kay Hian ‘buy; $1.16
For more stories about where money flows, click here for Capital Section
Bullish on semiconductor recovery
Analysts at CGS International (CGSI) and DBS Group Research have both kept their respective “add” and “buy” calls on Frencken Groupwith higher target prices of $1.40 from $1.38 and $1.48 from $1.47.
Although UOB Kay Hian (UOBKH) has maintained a “buy” call, it has lowered its target price to $1.16 from $1.31.
In FY2024 ended Dec 31, 2024, Frencken’s net profit grew 14.3% y-o-y to $37.1 million, driven by a 6.9% y-o-y rise in revenue to $794.3 million.
Revenue growth was driven mainly by the semiconductor segment, which grew 29.4% y-o-y to $365.5 million on better demand from its key customers.
“As the semiconductor segment also tends to generate better profit margins, Frencken’s gross margin in FY2024 improved to 14.5%,” writes CGSI’s William Tng.
Frencken’s management guides that it expects 1HFY2025 revenue to be stable compared with 2HFY2024, with higher revenue for its semiconductor segment and stable h-o-h performance for its medical, analytical and life sciences, automotive and industrial automation segments.
To accommodate new and expanded programmes as well as future business growth, Frencken has indicated that the group is considering building a new plant in Singapore to support its key semiconductor customers.
Tng writes: “In its FY2024 results call with investors, management guided that the potential capex involved for the new plant at $40 million to $60 million and a decision could be made in FY2026.”
Overall, Tng remains positive on the outlook of Frencken’s key semicon segment, which he notes will help growth in core earnings per share (EPS) from FY2025 to FY2027.
He writes: “Given the uncertainties from trade tariffs and geopolitical tensions that could affect Frencken’s semiconductor customers, we now value Frencken at 13.5 times our FY2026 EPS.”
“We reduce our FY2026 net profit forecast by 14.2% as we underestimated Frencken’s operating expenses previously,” adds Tng.
He noted potential re-rating catalysts, including a faster recovery in the group’s semiconductor business segment driven by new end-consumer products, better cost controls, and greater customer concessions on cost pass-throughs.
Conversely, downside risks include further cost escalation, which would negatively affect the group’s net profit, and further weakening in demand for its semiconductor business segment.
DBS analyst Ling Lee Keng notes that overall, Frencken’s FY2024 net profit and revenue met expectations.
She expects the group’s 1HFY2025 to be better than 2HFY2024, driven by the semiconductor segment, while stable performance is expected in other segments.
“With its diverse exposure to multiple market segments and sound financial position, the group is in a good position to continue riding on the recovery path going forward,” writes Ling.
As a result, the DBS analyst has slightly raised her earnings projections for FY2025 and FY2026 by 1% to 3%, mainly to account for the improvement in gross margin.
Meanwhile, UOBKH’s John Cheong has turned less bullish on this counter, given the uncertain global economic outlook, despite the semiconductor industry’s forecasted recovery.
While he keeps his “buy” call, Cheong has trimmed his target price to $1.16 from $1.31.
He notes that in Frencken’s FY2024, growth in the semiconductor segment was driven by increased orders from a key customer in Europe and continued recovery in sales from the Asia operations.
The analytical life sciences segment saw higher sales from a key European customer, while the automotive and industrial automation segments saw revenue decline due to slower customer orders.
Cheong adds: “Its diverse exposure to multiple market segments, entrenched relationships with global companies who are among market leaders in the high technology industry, and sound financial status help provide resilience and enable Frencken to thrive over the long term.”
He concludes: “We have reduced our P/E multiple peg from 14 times to 12.5 times to account for the more uncertain geopolitical environment.” The UOBKH analyst notes that one share price catalyst for Frencken is a higher-than-expected factory utilisation rate. — Douglas Toh
China Aviation Oil
Price target:
PhillipCaptal ‘neutral’ 85 cents
Reluctance to pay more dividends
PhillipCapital analyst Liu Miaomiao has downgraded China Aviation Oil (CAO) to “neutral” from “buy” after CAO declared a final dividend of 3.72 cents, representing a payout ratio of 30%.
There was also no special dividend. In FY2024 ended Dec 31, 2024, CAO’s earnings increased 33.13% y-o-y to US$78.4 million ($104.4 million). This was a disappointment to the analyst, who also lowered her target price estimate to 85 cents from $1.05.
CAO’s FY2024 earnings stood at 100% of her full-year estimates. Liu likes that CAO’s 33%-owned Shanghai Pudong International Airport (SPIA) continued to shine.
During the year, profits from CAO’s associates surged by 51.4% y-o-y to US$45.9 million, thanks to a recovery in international visitor arrivals.
However, the group registered a 1.69% decline h-o-h in 2HFY2024 due to higher operating expenses.
“The growth in associates was primarily due to increased refuelling volume, which accounted for 59% of the group’s profit,” Liu notes.
In FY2025, the analyst expects the airport’s contribution to increase to around 90% of pre-pandemic levels. In FY2024, CAO’s profit from associates remains at 70% of FY2019’s levels, lagging the international visitor arrivals, which reached 84% of pre-pandemic levels as at December 2024.
She also expects lower jet fuel prices to continue this year, given their strong positive correlation with oil prices. “The market anticipates downward pressure on oil prices due to Trump’s recent policies, such as easing Russia-Ukraine tensions, so the magnitude of profit growth may not be proportionate to the increase in refuelling volume,” says Liu.
The analyst also notes CAO’s lower margins from its trading business, which fell from 0.1 percentage points h-o-h in 2HFY2024 to 0.13 percentage points y-o-y in FY2024.
“This decline was attributed to lower trading volumes on the AsiaNorth America route, impacted by Red Sea tensions that forced rerouting, incurring additional costs and longer transit times. Consequently, volumes for the Asia-North America route dropped sharply and gross margins declined by 80%,” she says.
With the anticipated contango oil market and downward pressure on oil prices, Liu expects trading volume to rebound in FY2025. Contango refers to a situation where the forward price — also known as futures price — of a commodity exceeds the expected spot price of the contract at maturity.
“Coupled with plans to resume two vessels per month on the AsiaNorth America route, we forecast improved margins for the trading business in FY2025,” Liu adds.
“CAO has further deepened its involvement in the supply chain by expanding into other segments of the trading supply chain such as vessel leasing and storage, which is expected to boost margin further,” she continues.
As at the end of FY2024, CAO has a net cash position of US$500 million. This year, the company prioritises conserving cash to support an expansion in trading activities.
The group has no plans to return more capital to unitholders, she notes. “While cash alone accounts for 89% of its total market cap, we are concerned that the discounted valuation may persist due to a lower-than-expected payout ratio,” she writes.
Liu adds that while she has maintained her patmi forecast for FY2026 to FY2027 at US$82 million and US$83 million, she has applied a 15% discount due to CAO’s underused cash reserves. — Felicia Tan
Seatrium
Price target:
Citi Research ‘buy $2.65
Potential resilience with share buyback programme
Citi Research has upgraded its call on Seatrium from “neutral” to “buy”, with an unchanged target price of $2.65, citing valuation and potential resilience with its share buyback programme.
Analyst Luis Hilado says that Seatrium’s recent $15 billion win of an FY2025–FY2029 floating production storage and offloading (FPSO) contract, along with wins from FY2024 to date, should provide long-term revenue visibility into FY2031.
In his view, the completion of the acquisition of Keppel O&M in February 2023 and the resolution of prior arbitration cases have lifted part of the previous overhang on the stock.
A steeper learning curve involved in some of its renewable energy projects and ongoing costs and supply chain uncertainty are key risks to the analysts’ outlook.
Hilado notes that a significant portion of the company’s approved $100 million share buyback programme remains in place, with only $46.4 million utilised since the start of the year.
Its buybacks in January were at an average price of $2.20 per share. As such, there is a possibility that the company may conduct further buybacks and its share purchase mandate could again be renewed at the upcoming annual general meeting.
Hilado also believes that the cancellation of treasury shares to increase shareholder returns could also take place this year. The analyst’s target price for Seatrium is based on a price-to-book approach because FY2023 write-offs have significantly lessened the risk of goodwill impairments.
He applies a target multiple of 1.2 times on FY2026 as he believes the market will look into its long-term prospects as new higher-margin contracts should raise returns further and push ROE higher.
The target price is based on an FY2025 P/E ratio of 17 times and EV/Ebitda of 9 times. — Nicole Lim
Centurion Corp
Price target:
Lim & Tan ‘accumulate’ $1.20
Growth visibility and capital recycling moves
Chan En Jie of Lim & Tan has upgraded his call on Centurion Corp from “accumulate on weakness” to “accumulate” following its FY2024 results that came in “slightly” above his expectations.
With prospects of earnings growth, plus potential catalysts from asset monetisation, Chan has raised his target price for the stock from 83 cents to $1.20.
The dormitory operator’s core earnings for FY2024 ended Dec 31, 2024 were 107% of what Chan was expecting. Thanks to higher rental and occupancy rates, revenue of $253.6 million was also 106% of what he had projected.
The company plans to pay a final dividend of 2 cents, bringing the full-year payout to 3.5 cents versus 2.5 cents paid for FY2023.
As Chan indicated in his March 12 note, Centurion has a “healthy” pipeline of 9,700 new beds in the coming two years, equivalent to 14% of total capacity now.
“Strong growth in construction demand over the next few years in key market Singapore will be favourable for dormitory operators like Centurion,” says Chan, referring to the business segment that generated 69% of the company’s turnover.
Furthermore, Centurion Corp has flagged that it has appointed bankers for a possible spin-off listing of its assets into a REIT, potentially unlocking value through capital recycling of mature assets.
One of the two controlling shareholders, Han Seng Juan, who holds the non-executive director and joint chairman role, paid 98 cents per share to buy 600,000 shares after the results announcement.
To Chan, this suggests Han’s continued confidence in the company’s outlook. At current levels, valuations remain attractive at 7.9 times forward P/E and 0.73 times P/B.
Chan has raised his target price valuation multiple from 7.1 times current FY2025 earnings to 9.5 times. — The Edge Singapore
ISDN Holdings
Price target:
CGS International ‘add’ 40 cents
Gradual recovery expected Following the release of ISDN Holdings’ FY2024 ended Dec 31, 2024 results, CGS International (CGSI) analyst William Tng is keeping his “add” call on the stock at a higher target price of 40 cents from 35 cents previously.
In 2HFY2024, ISDN’s revenue grew 15.5% y-o-y, driven by a recovery in all its business segments.
The group’s key China industrial automation revenue, which makes up 71% of FY2024 revenue, grew 4.0% y-o-y, while the Southeast Asia industrial automation business grew 3.1% y-o-y.
Notably, the latter business segment grew 25.5% h-o-h as the industry staged a cautious recovery from the downcycle.
ISDN’s hydropower business is also up and running, with all three fully operational hydropower plants generating revenue of $22 million in FY2024 or 233% higher y-o-y.
Due to a different product mix, the gross margin for FY2024 declined by 1.2 percentage points (ppts) y-o-y. ISDN plans to pay a full-year dividend of 0.47 cents.
Meanwhile, the group’s management has indicated a cautiously optimistic outlook for FY2025. “In management’s view, its core industrial automation business should benefit from China’s strategic priority to address labour shortages and demographic challenges through automation and advanced manufacturing,” writes Tng in his March 10 note.
He adds: “In Southeast Asia, ISDN believes its recent expansion into Malaysia and Taiwan should enable it to capture growth opportunities from the ‘China+1’ reorganisation of the global supply chain as more manufacturing activity shifts to these regions.”
For the group’s hydropower business, a fourth mini-hydropower plant, Lau Biang 2, has commenced construction in Indonesia, and management expects operations to begin in FY2026.
Tng writes: “Given the better-than-expected FY2024 performance, we think that the gradual revenue recovery will continue in FY2025 to FY2026 and raise our revenue forecasts by 4.7% to 5.7%, leading to a 7.7% to 13.2% increase in our earnings per share (EPS) forecasts.”
With this, the analyst values ISDN at 12.4 times FY2026 P/E, one standard deviation (s.d.) above the average P/E of its previous earnings upcycle.
He noted re-rating catalysts, including a higher-than-expected net profit contribution from its hydropower business segment and a faster pace of economic growth as China tries to re-stimulate its economy.
On the other hand, downside risks include weak customer demand if the global economy continues to slow and the possibility of bad debts as economic conditions worsen. — Douglas Toh
